The deadline of midnight on 5th April is looming, when your tax free ISA allowance will end for 2019/20. In the midst of the current coronavirus outbreak, there have been calls for this deadline to be extended, to give investors more time to decide their best course of action, however at the time of writing, 5th April is still very much set in stone.
These are, beyond any shadow of doubt, uncertain times, but we can be confident that the restrictions in which we currently find ourselves will ease, and a degree of normality will start returning not only to the UK, but globally during 2020.
It is therefore, an opportunity for investors to think smartly, especially in taking a long term approach and, if able to, still maximise the allowed limit. It may be prudent to consider investing in a combination of both cash and stocks and shares ISAs, should access to money be potentially needed in the medium term, however ISA’s provide by far a better return than just keeping money sat in a savings account.
With the fall in interest rates to 0.1%, the top easy-access rate is currently around 1.31% from Virgin Money. This time of year is usually where banks and building societies tend to offer top rates to savers to encourage that last investment boost before the tax free allowance resets, however this year could prove to be the exception given the current circumstances we are living in. Nevertheless, if you have monies available, it is still a good idea to utilise your allowance. You won’t pay any tax once paid in, nor when money is taken out.
However if time is on your side and you’re looking long term, with a positive attitude to risk, then be one of the 3 out of 10 savers who opt for a stocks and shares ISA. Markets rise and fall, so you need to be comfortable that a fall in the short term will not cause you to lose sleep. Ideally you should be happy to invest for no less than 5 years, and not with money you may need over the next few months. Although there are no guarantees, stocks and shares ISAs have produced higher returns than cash as long as you’re in it for the long haul.
We should also mention the Junior ISA tax allowance of £4,368 which will rise to £9,000 next year. We’re seeing all too clearly how important it is to have savings behind you, so your children will only thank you for helping them build a nest egg to provide them with what could be some much needed financial security as they get older.
For more information and advice, please contact us here at Birchwood Investment Management.